Wal-Mart Stores said it’s reviewing Welspun India’s cotton certification records, joining Minneapolis-based Target to scrutinize the supplier over cheaper bedsheets being passed off as premium Egyptian cotton and sending the Indian company’s stock down by daily limits for a second session.
The world’s largest retailer will conduct further discussions with Welspun and “handle it appropriately” if any issues are discovered, according to spokeswoman Marilee McInnis.
Wal-Mart is Welspun’s third-largest customer, behind Target, which said late last week it had pulled sheets and pillowcases off its shelves after discovering they were mislabeled as Egyptian cotton. It also terminated all businesses with the supplier.
Bed Bath & Beyond Inc., Welspun’s biggest customer, and Wal-Mart sell the company’s 500 and 800 thread count sheets online under the Crowning Touch label. They retail for as much as $175 a set.
A Welspun representative didn’t immediately have a comment when reached by Bloomberg News. Part of a roughly $3 billion conglomerate headed by Balkrishan Goenka and with interests spanning textiles, steel, pipes, energy and infrastructure, Welspun said it manufactures every fifth towel sold in the U.S. and counts J.C. Penney Co. and Macy’s Inc. among its customers.
“This is a serious issue,” said S.P. Tulsian, who runs investment advisory firm sptulsian.com. “On one hand, the company has been talking of $2 billion top-line by 2020 and on the other hand the U.S. is a very big market for them. Now that goal of $2 billion revenue will be difficult to meet.”
Welspun fell another 20 percent to 65.85 rupees on the Mumbai exchange. The 36 percent two-day slide — the steepest since 1999 — cut the company’s market value to 66.2 billion rupees ($990 million).
Welspun Group said it wants to become one of India’s top 50 groups by market value by 2020, according to its website.